The regulator’s aim is to ensure that policyholders know what they’re getting to at the time of buying a cover.
In yet another attempt at ensuring uniformity in health policies, the insurance regulator has issued draft norms on the standardisation of general clauses. From being a lengthy and verbose document written in a language that can lead to some serious hair-splitting, the health insurance space has moved towards standardisation of exclusions, definitions and policy wordings, over the last few months. In addition, the Insurance Regulatory and Development Authority of India (IRDAI) also made it mandatory for all general and health insurers to offer a standard health product from April 1, 2020.
The move looks to push insurance companies into taking this up seriously and implementing these norms across all their health insurance policies. The IRDAI’s aim is to ensure that policyholders know what they’re getting to at the time of buying a cover.
Towards this end, the insurance regulator has now mooted a proposal to standardise certain common general clauses across indemnity-based policies. That is, for those covers that require the policyholder to pay first and claim later, it has specified the format for such clauses. The ultimate objective: policies should be worded in as simple a manner as possible; general clauses that are common across policies should be worded uniformly. Last week, the IRDAI has consolidated its recently-issued standardisation norms and has put out draft norms towards policy clauses’ standardisation. It has invited public comments for the same.
Many of the rules mentioned in the draft guidelines are already in place. “The draft note seems to be an additional clarification to the existing guidelines issued earlier,” points out Mahavir Chopra, Director, Health, Life and Strategic Initiatives, Coverfox.com.
“The health insurance space has seen a host of changes in recent months, so a consolidated set of uniform common clauses, will eliminate ambiguity across key terms and conditions,” says Mayank Bathwal, CEO, Aditya Birla Health Insurance.
Here are five such clauses that merit attention.
Migrating between products
The insurance regulator has now clearly defined migration – the process of switching between the same insurer’s products, group or retail. “So far, it was not clearly defined, with portability and migration being used interchangeably. Now, it (migration) refers to transferring the waiting period credit gained for pre-existing conditions and time-bound exclusions,” says Anurag Rastogi, President - Accident and Health, HDFC ERGO.
Simply put, if you are covered under your employer’s group health insurance policy and if you decide to quit, your coverage will cease. However, you have the choice of shifting to the same insurer’s retail product, while retaining the continuity benefits that you’ve already accumulated so far. That is, if you were covered under a policy for three years and the waiting period for pre-existing diseases (PED) was four years, the new policy will cover these ailments after a year.
“So far, there was no uniformity on carrying forward continuity benefits in case of migration, though portability (switching from one insurer to another) norms were clear. Now, the regulator has clarified that the entire waiting period credit for PED will have to be transferred to the new policy even in the case of migration,” adds Rastogi. To migrate, you will have to initiate the process 30 days before the premium due date. The premiums for the new policy will be determined by the insurer.
Porting an insurance, on the other hand, means switching from one company to another insurer’s policy that is mostly similar to the features of the old product.
Barring reasons such as fraud, moral hazard and misrepresentation, health policies are renewable for life. Neither can your insurer deny renewal nor hike premiums citing claims made earlier. However, the insurer is not duty-bound to give a notice for renewal. So, ensure that you keep track of your renewal deadline and pay premiums on time. While there will be a grace period even after your renewal due date, you will not be entitled to coverage during this period.
Withdrawal of products
Many policyholders, particularly senior citizens, have often witnessed their health insurers withdrawing products, citing unviability. “Often, insurers force senior citizen policyholders to shift to new policies by withdrawing their existing policies. The new products come with steep premiums, forcing policyholders to drop out,” says consumer activist Jehangir Gai.
The IRDAI’s draft norms on standardisation of general clauses do not offer any relief on this front. However, companies are required to intimate the policyholders about the withdrawal, 90 days prior to renewal. Any change in premiums, terms and conditions, too, has to be notified three months in advance.
Often, people end up with more than one health cover when they buy a retail policy in addition to their employer’s group cover or feel the need to enhance their coverage. Making claims under multiple policies can be a source of confusion. The IRDAI has, therefore, proposed uniform wordings to nip such disputes in the bud. “If multiple policies are taken by a person during a period from one or more insurers to indemnify treatment costs, the insured shall have the right to require a settlement of his/her claim in terms of any of his/her policies,” the IRDAI has said.
You can choose the insurer that you wish to settle your claims with. In case certain expenses are not paid due to sub-limits or deductibles clauses, you can claim the same under the other policy that you may hold. The latter will evaluate the claim independently in line with its terms and conditions. “If the amount to be claimed exceeds the sum insured under a single Policy, the insured person shall have the right to choose the insurer from whom he/she wants to claim the balance amount,” notes the regulator. That is, if your hold two policies with covers of Rs 3 lakh each, and your claim amounts to Rs 4 lakh, you can choose to make a claim of Rs 3 lakh under one policy and tap the other policy for the remaining portion. Before 2016, such cases would trigger the contribution clause, which stipulated that the claim will be settled by insurers in proportion of the sum insured.
Earlier – as in the above example – you could only claim Rs 2 lakh from the first policy (50 percent of the overall claims amount), while the remaining Rs 2 lakh came from the second policy.
Penalty for delay in claim settlement
A non-life insurer can accept for payment or reject a health insurance claim within 30 days from the receipt of the ‘last necessary document.’ In case the company fails to meet this deadline, it will have to shell out a penalty at the rate of the bank rate plus two percentage points for the period of delay. In cases where an insurance company feels the need for an investigation, it will have to complete the process within 30 days from the date of receipt of last necessary document. “In such cases, the company shall settle the claim within 45 days from the date of receipt of last necessary document,” the IRDAI draft guidelines state. In case of a delay beyond these timelines, again, the insurer will have to pay the penalty applicable to delayed claim settlements.All stakeholders, including the general public, can send their comments on these draft guidelines to the IRDAI by 25 January 2020.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.